Economic growth rate slips to 1.2%

A multibillion-pound effort by the Bank of England to keep the economy afloat ran aground on money supply problems during July, official figures have shown.

Broad money - bank and building society deposits and cash - remained flat throughout the month despite a £200 billion injection of new money, with the annual growth rate slipping to 1.2% - well off rate-setters' hopes for double-digit growth in the money supply. Growth is expected to decline further as the Government's deficit cracks down in the second quarter of the year.

With interest rates already at an historic low of 0.5%, analysts believe the figures could point to a ramping-up of the quantitative easing programme in the near future as a means of underpinning a fragile recovery.

The figures also show a 0.4% fall in lending to private businesses over the month, although this improved slightly on the 0.5% decline in June.

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